Daily Mining News for March 31, 1999
NORTH AMERICA
Will Canadians Be Allowed in American Bre-X Suit?
Lawyers are arguing that Canadians who lost savings in the Bre-X scandal should
be allowed back into a US class-action suit, reported The Financial Post. A US
federal court judge excluded Canadians from the Texas-based suit in January,
removing up to two-thirds of all Bre-X shareholders from the the claimants and
making them ineligible for any US settlement or Texas jury award.
However, lawyers contend that US courts can take jurisdiction for the Canadian
cases because they were directly damaged by the actions of Wall Street investment
banks J.P. Morgan & Co. and Lehman Brothers, so the US is the only place they
can hope for restitution.
Lawyer Paul Yetter pointed to a series of statements he says came from J.P.
Morgan, including one to The Financial Post that the site could contain up to 150
million ounces of gold, and "throw off cash flow of $500 million a year", which
Mr.Yetter argues was more than what the company itself was saying. As for Lehman
Brothers, the lawyer says analyst Daniel McConvey called Busang 'the gold
discovery of the century', saying the deposit could have more than 100 million
ounces, and talking about Busang producing more gold in one place than all ten of
Barrick Gold's (ABX:TSE,ME,NYSE) mines in one year. Mr.Yetter recently filed
sworn statements by 92 Canadians who said they read the J.P. Morgan or Lehman
Brothers remarks and decided to buy Bre-X stock, contradicting the judges original
ruling, in which he said there was no direct link shown between actions in the US and
Canadian losses.
The lawyer representing Lehman Brothers argued that only a fraction of the fraud
took place in the US, not enough to allow the courts to take jurisdiction over
Canadian shareholders. "This case is about a colossal fraud that was hatched in
Indonesia by a Canadian corporation in Canada...we're talking here about a
comment in a newspaper, and a report by an analyst. That's not substantial conduct
in the US.". The lawyer for J.P. Morgan says it's ridiculous to say conduct by the
financial firms led to the more than $3 billion in shareholder losses. He defended
J.P. Morgan's now infamous estimate that Busang could contain up to 150 million
ounces by saying that he started the sentence with "My guess is . . . " and added that
he in no way vouched for Bre-X or for the gold in the ground. (Mar 30/99)
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